Beruflich Dokumente
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STRUCTURE
22.0 Introduction
22.1 Objectives
22.2 Features of central sales-tax
22.3 Definitions
22.3.1 Appropriate state
22.3.2 Business
22.3.3 Dealer
22.3.4 Goods
22.3.5 Place of Business
22.3.6 Sale
22.3.7 Sale Price
22.3.8 Sales Tax Law.
22.3.9 Turnover
22.3.10 Year
22.4 Principles for determining when a sale or purchase of goods takes place
22.4.1 In the course of inter-state trade
22.4.2 outside a State
22.4.3 In the course of Import or Export
22.5 Liability to Tax
22.5.1 Rate of Tax
22.5.2 Determination of Turnover
22.5.3 Transactions Exempt from Tax
22.5.4 Collection of tax
22.6 Registration of Dealers
22.6.1 Compulsory registration
22.6.2 Voluntary Registration
22.6.3 Procedure for obtaining registration
22.6.4 Amendment of certificate of Registration.
22.6.5 Cancellation of certificate of Registration.
22.7 Value Added Tax
22.8 Let us Sum up
22.9 Glossary
22.10 Self Assessment Questions
22.11 Further Readings
22.0 INTRODUCTION
According to the article 265 of the constitution of India no tax of any nature can
be levied or collected by the central or State Governments except by the authority
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of law. The constitution of India vide entry no. 54 of the state list, gave power to
the state legislature to levy sales tax on sale or purchase of goods other than
newspapers, which takes place within the state. However, at that time the
parliament was not empowered to levy any type of sales tax. Therefore, only state
legislature enacted state sales tax laws in their respective state for levy of sales tax
on sale or purchase of goods other than newspapers.
Although, the State Government were empowered to levy and collect tax on sales
made within its own territory but there was no specific provisions of levying tax
on sale and purchase having interstate composition. As a result, same goods came
to be taxed by several states on the ground that one or more ingredient of sale was
present in their state. This led to multiple levy of tax. There for central sales tax
Act 1956 was enacted by the Parliament and received the assent of the president
on 21.12.1956. Imposition of tax became effective from 01.07.1957.
22.1 OBJECTIVE
The primary concern in this lesson has been to enable the students understand:
The rates of tax on declared goods are lower as compared to the rate of tax
on goods in the second category.
5 The tax is levied under this act by the Central Government but, it is
Collected by that state government from where the goods were sold. The
tax thus collected is given to the same state government which collected
the tax. In case of union Territories the tax collected is deposited in the
consolidated fund of India.
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6 The rules regarding submission of returns, payment of tax, appeals etc. are
not given in the act. For this purpose, the rules followed by a state in
respect of its own sales tax law shall be followed for purpose of this act
also.
7 Even though the central sales tax has been framed by the central
government but, the state governments are allowed to frame such rules,
subject to such notification and alteration as it deem fit.
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22.3 IMPORTANT DEFINITIONS
Following are the important definitions under the Central Sales Tax.
Illustration 22.1
Mr. X has one place of business at Faridabad and other at Sonepat, since
both the cities are in the state of Haryana therefore, the appropriate state
will be Haryana.
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22.3.2 BUSINESS [SECTION 2 (AA)] –
(a) Any trade, commerce or manufacture or any adventure or concern
in the nature of trade, commerce or manufacture, whether or not it
is carried on with a motive to make gain or profit and whether or
not any profit or gain accrues from it, and
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Any transaction incidental or ancillary to business will also be
treated as business. For example, if a registered dealer sells
outdated machines, he will be liable to pay central sales tax on it.
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22.3.3 DEALER [SECTION 2(B)]
Any person who carries on (whether regularly or otherwise) the business
of buying, selling, supplying or distributing goods, directly or indirectly,
for cash or for deferred payment, or for commission, remuneration or
other valuable consideration It includes - ..
4 Government.
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22.3.4 DECLARED GOODS [SECTION 2(C)]
It includes those goods which are considered to be of special importance in inter-
state trade or commerce under section 14.Some of these goods is –
• Cereals
• Coal
• Cotton
• Crude Oil
• Jute
• Oilseeds
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• Pulses
• Sugar
It is the aggregate of the sale prices received and receivable by the dealer
in respect of sales of any goods in the course of inter-state trade or
commerce made during a prescribed period. Prescribed period is the
period in which sales tax return is filed.
Activity A
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Activity B
A. Cereals
B. Sugar
C. Cotton
D. Newspaper
E. Pulses
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Activity C
A Delhi book shop sells old newspaper ( Hindustan Times, Delhi edition) of
June 5, 1990 to a researcher in Jaipur for Rs 600. Is it chargeable to central sale-
tax or not ?
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4. The sale concludes in the state where the goods are sent and that
state is different from the state from where the goods actually moved.
Illustration 22.2
A of Banglore sends goods in his own name to Delhi. At Delhi goods are
sold to different parties by the employees of A. In this case, the movement
of goods is not result of sale or agreement to sell. It is sale which takes
place in Delhi and not subject to central sales tax.
Activity D
The central sales tax is collected in the state :
A. Where the goods are delivered
B. Where the goods are manufactured
C. Where the movement of goods commences
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Activity E
Activity F
Illustration 22.3
ACTIVITY G
X of Gurgaon goes to Y of Indore to buy 500 bags of wheat. The goods are
ascertained and ready at y’0s warehouse. State whether it is sale outside a state
or not?
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A sale or purchase of goods shall be deemed to take place in the course of export
of goods outside India if, such sale or purchase -
As per section 5 (3), last sale or purchase of any goods preceding the sale or
purchase occasioning the export of these goods shall also be deemed to be in the
course of such export, if following conditions are satisfied –
(i) The last sale or purchase has been made after the purchaser of such
goods has obtain the order of export or agreement for export was
entered into by him.
(iii) Such last sale or purchase has been made for the purpose of
complying with such order of export or agreement of export.
(iii) Form ‘H’ has been submitted by the dealer to the prescribed
authority. The form should be signed by the exporter to whom the
goods are sold.
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If any designated Indian carrier purchases Aviation Turbine Fuel for the purpose
of it’s International flight such purchase shall be deemed to take place in the
course of the export of goods out of territory of India.
Illustration 22.4
A sale or purchase of goods shall be deemed to take place in the course of the
import of the goods into India if, such sale or purchase :
Activity H
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Illustration 22.5
A dealer in Delhi sells goods to B of Banglore. The central sales tax will be
collected by government of Delhi because sale commenced from Delhi.
Generally tax is levied only on the first inter-state sale. However, at times goods
are sold several times from one person to another during the course of movements
of goods from one state to another. Therefore, in order to claim exemption from
central sales tax on such subsequent sales following conditions should be satisfied
(i) The sales takes place during the movement of the goods.
(iii) The sale is a subsequent sale.
(iv) The sale is from one registered dealer to another registered dealer
on Form C or to the Government on Form D
Form E-I : This form is filled by the dealer who effects the first sale under the
Inter-State trade or commerce.
Form E-II : This form is filled by the dealer who effects the subsequent sale
under inter–state trade or commerce.
22.5.1.RATES OF TAX
The rate of central sales tax is 4 % or local state rate whichever, is lower
on the first point of inter-state sale if, the goods are sold to the government or to a
registered dealer, and on the fulfillment of specified condition, subsequent sales
during the movement of same goods will be exempted from tax. But, if any of the
dealers in these subsequent sales is or an unregistered dealer then the last
registered dealer will collect tax @ 10% from an unregistered dealer to whom
goods have been sold.
Illustration 22.5
A, a dealer in Bombay, sells some goods to B of Patna. The goods are sent by
road and the L/R is sent to B. Before, the goods reach Patna, B sells the goods to
D of Orissa by transferring the L/R. D takes the delivery of goods at Patna.
If all the dealers A, B, D are registered dealers them sale between A and B will be
charged to central sales tax and all other subsequent sales will be exempted from
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this tax. A will issue Form E-I, to B and B will issue Form E-II, to D. If D is an
unregistered dealer then B will charge central sales tax @ 10% or local sales tax
rate whichever is higher from D.
Activity I
X, a dealer in Delhi sells undeclared goods to Y of Punjab. The local sales rate is
Nil, 3%, 12.5%. What are the central sales tax rates if Y is a registered dealer and
issues Form C.
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Central Sales Tax
If tax forms a part of aggregate sales price then amount of tax collected by a
registered dealer shall be deducted from his gross turnover. Tax is calculated by
the following formula.
If the turnover of a dealer is taxable at different rates, then above formula shall be
applied separately in respect of each part of the turnover liable to a different rate
of tax.
Illustration 22.6
Ajay sells goods A and B. Goods A are charged @ 4% and goods B @ 2%. The
aggregate sales price before deducting central sales tax of A and B, is Rs.
8,00,000/- which includes Rs. 5,00,000 of goods A and Rs. 3,00,000 of goods B.
calculate turnover of Ajay.
Goods A Rs
Aggregate Sales price (a) 5,00,000/-
Rate of tax 4%
C.S.T. to be deducted (b)
(4 x 5,00,000/-) ÷ (100 + 4) 19,230.7/-
Turnover (a - b) 4,80,769.3/-
Goods B
Aggregate sales price (a) 3,00,000/-
Rate of tax 2%
C.S.T. to be deducted (b)
(2 x 3,00,000/-) ÷ (100 + 2) 5,882.3/-
Turnover (a - b) 2,94,117.7/-
If goods are returned by the buyer within 6 months, it’s sales price will be
deducted from aggregate sale price after submitting necessary evidence. Sale
price of rejected goods will be deducted even after six months .
Activity J
Name some of the transactions which are exempted from central sales tax.
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1. Compulsory registration
2. Voluntary registration
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22.6.1 COMPULSORY REGISTRATION SECTION 7
(1)
Every dealer who is liable to pay Central sales tax should make an
application for registration under the Act. to appropriate authority in his
state. If a dealer does not get himself registered, he would be subject to
penalty under section 10 which is imprisonment which may extend to six
months or fine or both and in case of continuing offence, a fine of Rs. 50
per day till the default continues.
1. If he is registered under sales tax law of state but, is not liable to pay
tax under central sales tax Act
2. If there is no sales tax Act in a state or any part of it, any dealer
having a place of business in that state or part there of
3. If he deals in a tax-free goods in a state
The dealer can apply for registration at any time and ,if he does not apply
for registration no penalty will be imposed upon him.
Advantages of Registration
1. A registered dealer has to pay actual sales Tax @ 4% only on goods
purchased by him for manufacture or resale and, he buys the same
against Form C. otherwise, he will be charged @ 10%.
2. Subsequent sales in the course of movement of goods by transfer of
documents of title to goods will be exempted from central sales-tax
if, registered dealer effecting sales is able to produce Form E-I or
E-II.
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(ii) Name and addresses of proprietor or partner of the
business.
(iii) Date of establishment of business.
(iv) Date on which first inter-state sale was made.
(v) Name of the Principal place and other places of business in
the appropriate state.
(vi) Particulars of any license held by the dealer.
2. More than one place of business in the same state – If a dealer has
more than one place of business in the same state , he shall select
one of these places as the principal place of business and , get only
one certificate of registration.
3. More than one place of business in different states. If a dealer has
more than one place of Business in different states, he will get a
separate certificate of registration with respect to each state.
Activity K
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2. B of Mumbai purchases of goods from Mumbai for manufacture &
sale in Mumbai.
Activity L
Application for registration under the central sales tax Act must be
made in
A. Form A
B. Form B
C. Form C
D. Form D
E. Form E-I
F. Form E-II
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Definition
VAT is a tax paid at each point of exchange of goods where value is added
starting from production till final consumption.
In case of VAT consumer pays tax on the value of product only once
while in case of sales tax he pays tax on some parts of the product more
than once
For instance, a car manufacturer may produce some parts, import some
parts, and buys some other parts. On the parts purchased he has to pay
sales tax. When the car is sold to the final consumer, then consumer has to
pay sales tax on the car which also includes tax on the parts on which sales
tax has been already paid by the seller. Thus consumer is paying tax more
than once. But, under VAT every buyer has to pay tax. After adding value
to it, the seller charges VAT from the consumer and after filing VAT
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return the seller can deduct the amount of VAT he has paid to the seller
and pays the difference between the VAT he has charged from the
consumer and the VAT he has paid to the seller, to the government.
Incidence of VAT
There are four rates 0%, 1%, 4%, and standard rate of 12.5%.
Whenever goods and bought or sold VAT has to be paid so cash memos or
bills are issued and every transaction becomes official. Earlier traders
were carrying on cash Business. Traders were not issuing cash memos
while making sales and customers were also not asking for cash
memos/bill because then they had to pay more for on account of sales tax.
Thus huge part of income was never disclosed leading to tax evasion. But
with the introduction of VAT, to claim the difference in VAT he has paid
to his supplier and the VAT he has collected from his customer, a business
will issue cash memo / bill. As a result the system of trading without sales
documents and not paying tax will be over.
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Benefits of VAT
• India will become a single common market with the abolition of sales
taxes and local taxes in 28 states and union territories.
• With the reduction in taxes, cost of products will decline and Indian
goods well become competitive in export market. This well lead to
earning of more foreign exchange.
Activity M
22.9. GLOSSARY
The various key words which arise in this chapter are :
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• Hypothecation : It means a pledge without transferring the
possession of goods to the lender. The owner of goods can use his
goods in the normal course of his business. But, if the owner fails
to repay the loan to the lender then lender can take possession of
the hypothecated goods.
• Pledge : It means transferring possession of goods to the lender
in order to get loan.
3. How will you determine taxable turnover under the C.S.T. Act ?
Explain.
• Girish Ahuja and Dr. Ravi Gupta, systematic Approach to Income Tax
and Sales Tax, Bharat Publication, latest edition.
• Mahesh Chandra & D.C. Shukla, Income tax law and practice, Pragati
Publication, latest edition.
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